Does Greater Diversity in Executive Race/Ethnicity Reliably Predict Better Future Firm Financial Performance?

Sekou Bermiss (), Jeremiah Green () and John R. M. Hand ()
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Sekou Bermiss: UNC Chapel Hill
Jeremiah Green: Texas A&M University
John R. M. Hand: UNC Chapel Hill

Journal of Economics, Race, and Policy, 2024, vol. 7, issue 1, No 4, 45-60

Abstract: Abstract In contrast to the equivocal findings in academic research, “the business case for diversity” is the dominant rhetorical paradigm for how US corporations debate actions and policies around racial/ethnic diversity. In this paper, we conduct an empirical test of the paradigm by gathering data on the race/ethnicity of the individuals shown on the leadership pages of S&P 500 firms’ websites as of mid-2011, 2014, 2017, 2020, and 2021, and then determining if any of nine measures of the racial/ethnic diversity of these executives reliably predict cross-sectional variation in any of six measures of their firms’ financial performance over the next fiscal year. We do not find reliable evidence that they do. As such, our results do not support the “business case for diversity” when the claim is assessed using 1-year-ahead financial performance metrics and multiple measures of the race/ethnicity of S&P 500 executives over the last decade.

Keywords: Executive diversity; Race/ethnicity; Firm financial performance; J01; J15; J29; J71; M12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s41996-023-00132-0

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